Are you looking for the lowest interest rate personal loan in Singapore? It can be pretty challenging because different lenders in Singapore have varying rates, and one has to review all of them to know which one is charging the lowest. As we are going to demonstrate in this post, there is a way out – Lendela. Keep reading to learn more about the best methods that you can apply to identify and enjoy the cheapest personal loans with faster approval time.
A Brief Summary of Personal Loans in Singapore
Before looking at the strategies you can use to enjoy low-interest loans, it is important to start by answering two questions, “What is a personal loan?” and “How does it work?”.
A personal loan, also referred to as a consumer loan, is a form of credit that people take for personal reasons (e.g. consumption). It is an unsecured type of loan, implying that you do need collateral to get it approved. This also means that you do not risk losing personal assets if you are unable to repay the loan, let’s say because of loss of income. In such a case, what will be impacted is your credit score.
When you take up a personal loan in Singapore, it gives you the freedom to use the cash for whatever you want. This is a sharp contrast to other forms of loans, such as car loans and mortgages, which strictly dictate how the money can be used. Indeed, you can even change your mind on what you want to use a personal loan for, and it will normally be OK. For example, if you wanted a personal loan to buy household items, you can change the objective and pay for a vacation.
Once approved, a personal loan in Singapore is deposited into your bank account in a ransom, and you have to repay in instalments. In Singapore, the maximum period for paying a personal loan is seven years. Remember that the faster you clear the loan, the cheaper it will be.
It is true that choosing longer loan tenure will attract lower monthly charges, but the amount payable will be higher compared to another person who clears the loan fast. The best thing is striking a balance on the loan term, which means selecting a period that will cause less / no disruption in your income.
Personal Loan Interest Rates and Effective Interest Rates (EIR)
To enjoy low personal loan interest rates, it is important to understand that they fall into two categories: The personal loan interest rate (also known as advertised interest rate) and annual percentage rate (APR).
Personal Loan Interest Rate
The personal interest rate is expressed as a percentage and is applied on the loan principal alone. Take the example of a personal loan of $10,000 with a fixed interest rate of 9% for a period of five years (60 months). Over the term of the loan, you will be expected to pay $2,455 as interest on top of the principle of $10,000.
Annual Personal Interest Rate (APR)
If you only use the personal interest rate, it might not provide a clear picture of the loan situation, especially the ultimate amount payable. Since the interest rate only factors the principal, it will be good to consider a different type of calculation – the annual percentage rate (APR). So, how does it differ?
The annual percentage rate (APR) on a personal loan in Singapore combines the advertised interest rate with any other charge associated with the loan. If the loan does not have other fees, which rarely happens, APR will be the same as the personal interest rate. To demonstrate how APR works, let us take the same example above. Take the case of a person who borrows a $10,000 loan with tenure of five years at an interest rate of 9%. If the loan also has a processing fee of 2%, it implies that the APR increases to 11%.
Calculating the APR and effective interest rate (EIR) of a personal loan can be challenging, especially when dealing with variable interest rates. Therefore, if you are unsure about the amount to be paid every month and by the close of the loan tenure, it will be a great idea to use a personal loan calculator.
How to Get the Lowest Interest Rate Personal Loan in Singapore?
Now that you know how interest is calculated when borrowers place their applications, how exactly do you get to enjoy the lowest rates? Here are the four main strategies that you can apply when taking a loan in Singapore.
Ensure to Have Excellent Credit Score
As we mentioned earlier, a personal loan is a form of unsecured credit, implying that instead of looking at the collateral as a security, they check personal credit scores. This is a rating that is given by the Credit Bureau of Singapore (CBS) after gathering your credit history from different stakeholders, such as banks and insurance firms. Things that go into calculating the score include:
Payment history (35%).
Amount awed (30).
Credit history (15%).
New credit (10%).
Credit mix (10%).
The score is given a four-digit figure, with the lowest being 1,000 points and the highest 2,000 points. Those close to the bottom, around 1,000 points, are considered the riskiest and rated HH. However, those with a good score, around 2,000 points, are rated AA and considered low-risk parties. With an excellent credit score, say 1,990 points and more, you are sure to enjoy the lowest interest rate personal loan in Singapore.
Therefore, you might want to start by getting a personal credit report to check if there are errors, and if any are found, have them fixed. Also, make sure to repay the outstanding debts and maintain a good credit mix to improve the score.
Borrow from Licensed Lenders with Low-Interest Rates
In Singapore, Lenders charge varying rates depending on the targeted profit margin and operating conditions. For example, banks that operate from the central business district of major towns in Singapore and work with a large workforce might charge higher rates to meet the high cost of operations. However, online financial institutions on the other hand, have lower overhead costs, which make it possible to charge low interest rates.
Negotiate for Lower EIR Rates
Although rarely do borrowers go this route, it can work excellently for you. Think of it this way: The banks are financial institutions and are looking for you to make a profit by lending you cash. So, before you sign that loan agreement, why not try to get the interest revised down. Once the lender issues an offer, say at 5.5% interest rate, go ahead and ask for a review. Most lenders will be willing to cede ground. Note that even if you manage to get a 5.5% interest rate reduced to 5.3% or 5.4%, a margin that might appear small, the truth is that the effect on the amount payable will be immense.
One of the best methods of pinpointing the lowest interest rate personal loan in Singapore is using our loan comparison. This platform is designed to simplify the process of the loan application and also allows you to use it to identify loans with low interest rates. Here is how it works:
Instead of you going through a long list of banks and licensed financial institutions in Singapore, which takes a lot of time and raises the risk of falling into the hands of loan sharks, Lendela does all the work for you. Lendela works with banks and financial institutions, and the process of applying for a loan via our platform only takes a short moment.
On Lendela’s website, you are required to make a short application (this takes only a few minutes).
The application is sent to multiple lenders, who in return provide their offers. This way, you get to enjoy the shortest approval times.
Lendela helps you to pick the offer with better conditions, such as the lowest interest rates or a loan amount in line with your monthly income. Then, you easily book an appointment with the lender for final checks and signing of the agreement.
Sign the loan agreement and the money is released into your account.
How do you get the lowest interest rate on a personal loan in Singapore? You can do this in two ways: Comparing various loans and lenders yourself to identify the personal loan with the lowest interest rates, or using Lendela, a simple loan comparison platform. The two main interest rates charged by banks and financial institutions are the advertised interest rate which is based only on the principal alone, and effective interest rate (EIR) that factors the additional charges too. Because lenders check for the applicant’s credit score to determine the monthly rates, you need to ensure that your score is decent to excellent.
You also need to have a demonstrable monthly income to get the best rates. Regardless, the best route of getting the lowest interest rates is using Lendela. Instead of submitting multiple applications to different lenders, Lendela asks you to submit only one. Then, Lendela sends your application to different lenders to reduce the application and approval time.
The lenders return with pre-approved offers, and the applicant can start to compare the terms, including loan amount, EIR, tenure, and fees. Finally, the applicant will be booked for an appointment to sign the loan agreement to get the money disbursed to his / her bank account on the spot. From there, the applicant must start to repay the loan in line with the terms.
If you want to get the lowest EIR personal loan in Singapore, the above four tips are all that you need. More importantly, let a service like Lendela’s hold your hand for shorter approval time and as a way of avoiding loan sharks and at the same time find the absolute best offer for you. Finally, make sure to repay the cash in line with the loan agreement to avoid damaging your credit score.